Coop's Reduced Profits, Shortages Cause Drop In Membership Rebates

Low profits and a general decline in business were the main reasons behind what Coop President Milton P. Brown '40 terms "probably the worst year in the Coop's history."

"It was a disastrous year for business in general," Brown said Friday, "and the Coop, which made money, did better than most retail stores, but we still didn't make nearly as much as we originally expected."

The Coop's financial problems led to a drop in rebates to three per cent on cash and one per cent on charge purchases for 1969-70. Rebates were down four and one-half per cent from the previous year, and seven per cent from June, 1966.

Brown explained that Coop officers had originally predicted a profit of $500,000 for 1969-70. The Coop actually earned just $100,000.

Not Hoarding Money

"We're not hoarding our money," Brown said. "We're required by law to pay out in rebates all profits from members' business. This amounts to about 80 per cent of our total profit." Brown explained that the reduction in profit meant that the Coop had just $80,000, instead of an expected $400,000, to distribute to members in rebates.

Another major factor in the reduction of rebates was the several hundred thousand dollar "shortage" the Coop faced last year. "There are three types of shortages: bookkeeping errors, internal stealing, and external stealing," Brown continued. "There's absolutely no way to determine how much of our shortage is attributable to any one of the three factors."

Found Unpaid Bills

Part of the shortage problem arose when Fred Fox, who became the Coop's comptroller in September 1969, found several thousand dollars worth of back bills from manufacturers which the Coop had left unpaid. When Fox paid those bills, their expense was charged entirely to the 1969-70 account, instead of being spread over a number of years.

"But we just can't determine how much that hurt our earnings this year," Brown said.

A major part of the Coop's problems seems to stem from its decision to switch its bookkeeping operation to the Harvard Trust Co.

When the Coop handled its own books, it did not pay rebates to students who failed to pay their bills within 30 days. Now that the bank handles bills, the Coop pay rebates on all purchases, whether or not the member pays his bill on time, and the bank is charging one and one-half per cent interest per month on late bills.

Dividing The Pie

Therefore the amount of money set aside for rebates is divided among a larger number of people, because students who pay late do not forfeit their rebate. Instead of losing the rebate, delinquent bill payers pay interest to the bank.

Brown insists that the switch to the Harvard Trust Co. has been a financially successful one for the Coop.

"Our accounting operation had been very poor," he said, "and we had a heavy debt load-from members not paying their bills. We feel that switching to the bank has improved our accounting process, and has also helped us financially, as the members now owe the bank, instead of the Coop, for their bills."

But many students, who see theirrebates dwindling while the bank gets interest on late bills, are not so convinced of the wisdom of the move. "My rebate gets smaller, and the bank gets more money," one perplexed student said. "I don't get it."

Expansion Major Issue

Another major issue for the Coop has been the question of expansion. Essentially, the Coop must decide just what kind of a store it is going to be. Some people, like Paul A. Silver '72, an opposition candidate elected last week to the Coop's Board of Directors, want the store to be a place to buy books and necessities cheaply.

"The whole purpose of going to the Coop is to get things cheaper than anywhere else, or at least to get a rebate," Silver said. "How many students go there to buy beds, or color televisions?"

Others, like new Coop General Manager Howard W. Davis, want the store to carry any kind of merchandise students are interested in buying, even if it means competing with department stores and specialty shops in Greater Boston.

Doesn't Mind Competition

"It the other stores can get their business, fine, but we're going to go after it too," Davis said. "I don't mind competing."

In the recent elections for the Coop's Board of Directors, four candidates for the eleven student seats won over Coop nominated candidates. These four will probably seriously question the Coop's expansion, as well as its financial efficiency.

But as to the issue of the Coop's rock-bottom rebate for 1969-70, the main reason appears to be disastrous earnings figures. Brown feels the situation will improve this year.

"If I felt it would go on this way, I'd say the Coop should either get a new president, or close down," he concluded.